My Final Thoughts for the Year 2015

We've finally reached the end of a busy yet productive year at Cade Trader and what a year it has been following all the ups and downs experienced through the months gone by. It has been one of tremendous difficulty but also one of success. 

There were times when I thought about how harsh the realities of trading could be on the psyche at moments when you've reached rock bottom but suddenly realise it isn't quite the bottom. Or the regret of knowing you're position was in the green only to see it fall all the way back to register a loss. 

But then I reflected on my own level of mental toughness when confronted with these realities and how I've grown so much stronger in dealing with them constructively without undoing the years of progress I've made in getting to this point. The biggest of them all was putting my mind to ease by accepting that profitability is a long term goal but the pathway to it is so much longer than I had imagined three and half years ago. 

Looking back to that day, I've seen many different scenarios play themselves out and been privileged at times to give commentary to those in the trading community as to my thoughts and analysis at the most crucial moments when the market seemed to be tipping in either direction. 

As we enter a new year, with it comes new prospects and my hope is by this time next year I will be able to share the successes of what I have planned for the year ahead for Cade Trader. My goal has always been to give an honest account to the ebbs and flows of the market and if it weren't for the constant support and interaction for you the reader , I don't think I could have reached where I have so far. 

It is with this in mind that I wish to extend my deepest gratitude in allowing me to share my knowledge with you and at the same time promise that 2016 is going to be an exciting year for Cade Trader with new features to assist you the reader in navigating your own trading journey and ensuring success along the way. 

Merry Christmas and a Prosperous New Year to all!!!

Cade Trader 

It's only getting tougher for EU leaders to prove their case

You'd agree with me if I told you the biggest news story that came out of the Eurozone this year is arguably the Greek debt showdown between creditors and newly elected leftist leader Alexis Tsipras who had won over the hearts of most Greeks by promising a dramatic cut to austerity measure put in place by previous governments who had hope to get the Greek economy back on track which now looks set to be derailed.

What Tsipras didn't realise is that international creditors had just about enough of his antics and played hardball right till the end eventually securing a deal that saw tougher conditions placed on his debt ridden nation.

We've seen how debt has formed the central point for those skeptics who argued against the formation of such an agreement years ago with the debate rearing its head more frequently as more nations become overburdened with debt piles used to afford politicians power with no degree of prudence whatsoever.

But it's my belief that we are yet to see the end of these critics with every passing year new claims and evidence showing the cracks in a failing system.

Finland should never have joined the euro, its foreign minister says https://t.co/Wn9sOnNPtz pic.twitter.com/H0kBmsLYi9

— Bloomberg Business (@business) December 23, 2015

There has been a slow buildup of momentum from nations within the EU expressing their dissatisfaction about the way things are going with one of the earliest political figureheads to put the public's support for EU membership to a referendum being British Prime Minister David Cameron from the Conservative Party. If one goes back to the United Kingdom's staunch opposition to joining the EU under the leadership of Margaret Thatcher you get the sense that the nation was always going to require a level of flexibility when agreeing to join such a bloc.

It would seem that Cameron is happy to stayed within the trade agreement however he will be looking for a renegotiation of terms to its membership that would see the UK yield greater power in deciding policies that encourage closer integration amongst members, a move it wishes to distance itself from due to an over reliance of smaller debt burdened nations on bigger economic players to bail them out as was the case with Greece.

But we've seen a wave of anti-austerity pro-independence political parties rising as tempers amongst those who feel let down by those political leaders who reassured them of no damage to their social transfers but forced to choose between lenders or voters. We've seen recently in Portugal a change of power with a newly elected government threatening to unhinge all the measures used to secure bailouts, a similar move to the Greeks.

In Catalonia, Spain we saw a massive victory for a pro-independence party setting the trend leading up to general elections heading into 2016 with the ruling party facing concerns that it won't be able to convince voters to keep the party in power with the nation falling into the hands of anti-austerity movements. The bar has been set and the stakes are high but who will hold and who will fold?

I recently blogged a post regarding the seismic problems Europe is facing comes down to structural problems within each specific nations as opposed to a common theme around the EU. One country that shows exactly this is Finland who has recently said it wishes to have a referendum to assess its citizens willingness to stay in the Eurozone.  

The problem seems to stem from a lack of control over a local currency, a dilemma it find itself in when it joined the EU and accepted the Euro as a common currency. The nordic country is export dependent and labour costs tipping the high end, their products are simply to expensive to sell within the EU.

Not only this, but the Euro hasn't depreciated enough against other major trade partners that would allow Finnish products become cheaper. There have been many who have proposed that perhaps the Finns should revert back to using its own currency but that would mean moving away from closer integration and probably a step that doesn't align itself with that of its EU member counterparts.

This has set a trend in motion that I believe will take a big leap towards dominating the existing belief that debt is the problem when it comes to the EU. If the Eurozone were to succeed by any measure it will be forced to let loose it grip of these smaller players, a strategy which could work for and against it but it is certain that should it not the fate of the Eurozone is doomed.

Will India become the next frontier?

What a turbulent year it has been for most markets following a big drop off in demand stemming from China, a nation the world has become too reliant on to fuel new demand as old economies take a backseat and try fix problems of their own. However as much as the media focus has been tuned in on China, the Asian region should not be ignored given the great economic strides various countries in and around have made in progression of their own economies and that of the region becoming a major trading hub globally.

For one, India has remained largely unnoticed as chaos descends on the world economy, yet surprisingly the country was able to record the largest economic growth this year amongst its peers. Its safe to assume that the sheer number of people in China being economically liberated has resulted in robust global demand for goods and services ranging from the industrial sector to the consumer segment.

Many forget that India exhibits a similar population size to their neighbours China which does give them scope to grow at a rapid pace, the same seen by China over the past two decades or so.

However I think the greatest separation both nations have from each other is the level of organisational skills used to implement transitional policies. The many years of communist rule has left China with large pools of rural areas not yet emancipated from economic oppression yet its citizens willing to fall in line to government's authoritarian power after decades of not knowing any better.

It is this system, whether wrong or right, that allows China to control the process so well compared to the disruptive forces that would usually take precedent during a shift in economic and political philosophy.

But in India you have past colonial rule followed by mass poverty on a scale so large the only way to describe it would be in an abstract sense which is a great crime to the people of India. Chaos rules the day as those seeking economic retribution try make a menial living from the little skills they do possess.

If we are to see any concrete growth from this populous nation we need to see a government prepared to lay down the foundational elements needed to leverage future generations that require certainty in upholding continuity coupled with organisational processes that free those from the chaos and places a system where the ability to do business isn't hampered by the lack of infrastructure.

The world's fastest growing economies: ✓ India ✓ Qatar ✓ China More: https://t.co/u2dUaCf710 #UnitedNations’Day pic.twitter.com/Rfz7A9wVTZ

— CNNMoney (@CNNMoney) December 22, 2015

The economic challenges faced by Indians are certainly not absent from the academic fields applied to other countries attempting to create well being for its citizens however I don't think the world has seen such a project of this scale involving the numbers that India exhibits which does give you a sense of excitement but at the same time trepidation over whether authorities can pull off such a mass human project.

I think the biggest confidence booster for India was the elections it held in 2014 which saw over 550 million Indians coming out to vote over a series of weeks because of the enormity of the task, a feat which represented the largest ever elections globally. The way in which officials conducted themselves and the willingness by Indians to come out and make their feelings known to political leaders show that India is on a strong footing going forward.

The result saw Narendra Modi being elected the Prime Minister becoming only the 15th person to do so since India's independence. Modi has won over business with his right leaning policies and has thus far impressed those who have elected him but the true test now lies in whether he can continue building on the momentum he has been afforded thus far and balance relations between those he needs cooperation from to ensure his political goals are met.

On the foreign relation front he seems to have attracted the attention of some big name countries who may have felt skeptical over China's ascendency to economic power after years of closure to the outside world together with their unscrupulous ways in conforming to worldwide norms exerting a degree of arrogance.

This has won Modi favour with nations such as Japan who has long been one of those critics of China with relations between the countries blossoming extensively with high speed railway infrastructure projects in the pipelines that would provide much needed transit ability to Indians at speed.

Yet India remains one of the founding members of BRICS, an economic association representing the largest developing economies around the globe with membership of Brazil, Russia, China and South Africa. It places them in a diplomatic position of striking political power. In years to come it could be the bridge between China and the rest of the world working in unison, no one ever thinks of these things until they actually materialise.

And to review the economic situation from each nation in the BRICS, it's fair to say that India has been the only shining beacon amongst all members showing that the pathway it has embarked is one of strength and not pure reliance on an ascending economic super power.

I really feel excited about the prospects of the future and looking forward to journal the progression as they begin to unfold for India. The most promising facet is the future of the world's wealth will no longer reside in one place but rather it will be spread from east to west, a sign that inequality could see a dramatic fall come the end of the 21st century.

Are lower oil prices necessarily good?

With 10 days left to spare of 2015 the price of oil refuses to plug the plunge as pessimistic news continues to add fuel to the flames firing up the worst case of bearish sentiment in the commodity that has been seen in decades let alone the Financial Crisis. Analysts have been left red faced the entire year as they've had to constantly revise their forecasts downward, coming in line with a more realistic yet abrupt production decision from rivals on both sides of the Atlantic.

The aggressor has been seen as Saudi, the lead producer of OPEC, who has unleashed an attack of mammoth proportions in terms of oil quantities reaching the market which has not only assisted the negative views in the sector but has seen storage facilitates and tankers scrambling to find short term solutions to avoid stored out inventory facilities with the prospects of turning suppliers away.

Yet it was the US shale producers that have added the latest woes to price with Baker Hughes reporting that the number of rigs that had been added to the existing ones already in operations registered the biggest increase since July of this year notwithstanding a decision by US lawmakers to lift a 40 year ban on the export of crude oil on Friday opening up the possibilities of further gluts being seen in the global oil market.

CHART OF THE DAY: Brent #Oil Plunges to 11-Year Low https://t.co/2RYFlGFWbl #OPEC #shale #BREAKING #SaudiArabia pic.twitter.com/ApCmh2Zkoj

— Javier Blas (@JavierBlas2) December 21, 2015

 Lower prices of oil have left monetary policymakers in developed economies suffering from chronic deflation in fear that these price wars could undo the years of work to stabilize demand with relaxed monetary policies with many including the ECB and BOJ opting to ease up further in the hopes that stimulus could revive demand.

But we starting to find the more reliance authorities place on monetary officials to guide economies the more prominent structural economic problems begin to show themselves in an era that has seen government's transition their nations theme from prosperity through production and employment to a social security reliance that encourages citizens to find any excuse not to produce value in the economy at the expense of those who are willing and able to do so.

We've seen the former class shrinking and the latter growing at a rapid rate in relation to one another creating a large disconnect to how these so-called equality gap fillers can be funded, but I digress.

Lower oil prices don't help these economies as they merely encourage monetary authorities to continuing printing money to fuel demand, the dilemma being the problem never goes away because money will always find a way to achieve returns by placing it in asset classes that eventually become over inflated over time as we have seen worldwide instead of finding its way into the pockets of consumers that are the necessary elements in starting economic activity.

We cannot expect to find demand from these economies as the wave of free money simply throws a veil over existing problems and judging by the urgency of finding political resolution regarding economic catastrophes eg Greece, it doesn't appear as if we'll see any proper thought into dealing with these issues anytime soon.

In the developing world, these economies have been hurt the most due to the slump in most commodity prices so oil falling out of bed would most definitely find its way into the troubling analysis currently being told in assessing the damage done following the rout. If we think of some of the casualties Nigeria, Venezuela, Angola and Brazil are the first that come to mind when thinking of their dependence to oil revenues in their respective trade balances to offset huge outflows from imports.

Nigeria has seen a dramatic reduction in its foreign reserves that it has been forced to allow the free flow of exchange to occur with a process whereby the central bank places foreign currency requests to be placed on hold until it becomes available. Venezuela is currently grappling with inflation of 150% because the downward spiral of oil prices means they do not make enough from the revenue to cover for basic necessities such as food. Added to this the political scene that's been unfolding as a result of this and you have a recipe for disaster.

These two countries aren't the only ones suffering tremendously but you do get a sense of panic that hangs in the air when it comes to judging the strength of these economies. Consumers have been left with little to no change in the price of fuel as the negative sentiment has remained rife within the emerging market currency market that has drastically depreciated local currencies to the extent that any drop in the price of oil is cancelled immediately by the devaluation of the currency.  

It seems the only benefactors of the lower oil prices has been the US but lacklustre economic growth doesn't suggest that the trend of higher prices will be seen anytime soon. If we are to see that we need to see simultaneous global growth with a good handful of sustainability added to the mix and right now nations around the world couldn't be more further than what we've seen before.

With gas near $2 a gallon, 100.5 million U.S. drivers will hit the road for the holidays https://t.co/wZa7ObSK1b pic.twitter.com/FTWXbsXGWS

— Bloomberg Business (@business) December 21, 2015

Oil continues its freefall making this year's performance one of its worst

I must be the first to admit that a few months back when Goldman Sachs sent out a report stating that they saw a barrel of oil dropping as low as $20 I became a bit skeptical to how such a figure could be bantered around and questioning whether this was just another pessimistic report that had found its way into the hands of media sensationalists following the Glencore story.

Looking back it did seem unlikely to reach those levels anytime soon as there seemed to be strained being experienced from OPEC member nations that were hampering good relationship built over the years which is why I thought a move to cut production would be on the cards soon. Added to this US shale gas producer had responded quickly to the drastic drop and began focusing on higher efficiency wells whilst turning off the higher cost ones.

This abated the fear within the sector...for now. With the recent OPEC summit being concluded at the beginning of December with no conclusive agreement to the amount of output that needed to be cut with Iran putting its weight down and literally telling the rest of the members that it will be engaging with the sale of over a million barrels per day sales into the market to recoup the capital inflows it wasn't afforded while sanctions had been placed on them from the West.

Today we sitting with oil prices below that last seen during the Financial Crisis, $35 seems to be the number most analysts are following which doesn't leave us far from the $20 predicted by Goldman Sach's. It looks as if the Saudi's are yet finished with their annihilation of the enemy, shale gas producers as $20 comes close to the break even to those suppliers.

With the Fed lifting rates for the first time in almost ten years this week and expected to continue doing so, I can't foresee any reason why the drop to $20 won't happen and if it's any consolation I think the lacklustre demand once the interest rates find the sweet spot in the US economy we'll see a fast move to the target. But until stay tuned to the story, it just keeps getting interesting.  

This is why Goldman thinks oil is headed to $20 https://t.co/Zrvq7EjgnZ pic.twitter.com/8SdwivZXir

— CNBC (@CNBC) December 18, 2015

The drive towards healthier living and the measures of actions governments around the world have taken to curb smoking gains significant ground as the years go by. With taxation the easiest way instantly dents the affordability, health ministry's have been fighting a new scourge, counterfeit cigarettes that find their way into the market.

Speaking from experience in South Africa where illegal cigarettes being smuggled in from neighbouring Zimbabwe has exacerbated the decline in volumes sold by the big producers so much the government has allowed them to lower the price by selling a packet at a recommended selling price that has resulted in lower margins for producers and retailers alike but found a resurgence in demand.

However that's the least of their worries as an announcement made by French parliament yesterday implementing a law that requires cigarettes been sold in plain packaging being met with fuming anger by producer who are calling it an infringement on their right to create a uniqueness of their products.
I tend to see the argument that cigarette producers are trying to portray but the unfortunate truth is the detrimental long term effects suffered from people who have smoked ends up becoming a burden to the state who are already seeing the pressure building from an aging population on the national health system of these countries.

But here's the contradiction, if smoking is so bad why have governments around the world set in motion the liberalisation of marijuana sales and production?  

Cigarettes must be sold in plain packaging in France from next year https://t.co/Q3VwJg8Uup pic.twitter.com/qmNpTHLUN5

— Bloomberg Business (@business) December 18, 2015

Fed finally has liftoff in one of the most anticipated rate hikes of all time

While waiting for the Fed's announcement yesterday there was a sense of relief if not cohesion amongst most in the financial markets in agreeing that the time had arrived for the end of a historical era for monetary policy in the US by witnessing the first interest rate hike since June 2006 with an unanimous yes vote from all FOMC members yesterday.

Going into the announcement the Fed was weighed down heavily by the approach it took in its tone it set in assuring the market that the economy would be able to absorb a hike of minimal proportion but then at the same time allay fears that any further increases would be conducted with the utmost care with the state of the economy's on top of the agenda making one feel as if the ground below us may not feel as solid as we think.

The market has been tinkering with the thought of a rate hike for some time now which made me believe that it wasn't so much the rate hike that would hinder the market's ability to find certainty but more so the Fed's guidance to how it plans to normalise the interest rate cycle from a very low base, probably the toughest feat to achieve since the Fed embarked on it's gung ho monetary easing stimulus.

The Fed seemingly managed expectations well giving broad indicators of what it thought would be suffice to say whether a goal had met to the understanding of the FOMC but I must admit, did anyone expect it to have stringent measures already in place before they've even started the process? You would be gullible to think that were the case as the intricacies would require more evolution of the economy from this current resting point and a more thought out process.

#FOMC agrees unanimously to raise target rate. statement talks of hiking 'only gradually' https://t.co/NDnW74gjgf pic.twitter.com/E7VcPJkrsA

— Financial Post (@financialpost) December 16, 2015

But the true test of the Fed will be how it manages to navigate through what I think will be persistent yet troubling theme in 2016 namely emerging markets. We've seen the onslaught on commodity markets this year but we yet to see the full effect of these on most of those economies. To make matters worse, the global attraction to a strengthening dollar has resulted in most of the emerging market currencies selling off in a frenzy and investors finding refuge in the hands of safety.

The central bankers of some these economies have pre-empted the Fed's action and began the process of lifting rates in the hope of getting a head start but they've done so risking the well being of their economies.

So far we've seen no constraint when it came to selling these riskier currencies off and now that the Fed has placed an expectation of reaching 1.4% by the end of next year, translating into four rate hikes in the process, the pressure will inevitably begin to build as we start to see failure from these developing economies struggling in a tough cycle bestowed on them from the commodities rout.

This could very well play against the stability the Fed wants to abate which is why they struck such a dovish tone last night knowing the full risk these economies present to them. China is one of the key components in ensuring stability to these developing economies and it will be interesting to see if their own policymakers can get a hold of their own dilemma's.

“The bottom line is.. weaning the world off the Fed’s monetary largesse is going to be hard" https://t.co/YBCaYgFg5d pic.twitter.com/EVpSobfxXA

— Mick Peel (@Mick_Peel) December 17, 2015

ANC faces a tough decision over Zuma

I've been following the extensive coverage that's been given over the latest scandal surrounding that of Jacob Zuma firing Finance Minister Nhlanhla Nene last week Wednesday and replacing him with a unknown back bencher collecting tertiary certificate's with a failed reputation of running municipalities into the ground.

The reaction from both local and international investors sent a strong message to Mr Zuma and the ruling party, that if a ministry of such importance were going to be tampered with for one's own personal use, they were prepared to make capital flee faster than a jack rabbit smoked out his hole.

Zuma quickly reversed his decision late on Sunday evening by swapping his new finance minister with that of a former finance minister but now running a different ministry, Pravin Gordhan. It was as if you could hear the market breathe a huge sigh of relief when the announcement made its way through the various media outlets but no doubt the damaged caused to the nation's reputation.

It now appears that banking executives made a strong appeal to some senior members of the ruling party to rethink the decision and change it before disaster sets in. It's important to note at this time that it is understood that Zuma had not consulted any of his cabinet members or senior leaders in the ruling party before making the decision which left the ruling party very red faced.

The decision to reverse his decision implies some harrowing times lie ahead for this flawed leader with no control of himself. It tells us that even his own party has lost trust in his ability to successfully lead South Africa and this has forced them to clip his wings in terms of powers as president to make decisions for himself.

Installing Gordhan has helped the restore calm back into the market for now, but it wasn't Zuma's choice to do it but that of his fellow leaders. Effectively Gordhan can be seen as being the most powerful person in South Africa right now.  One misstep from Zuma and the door to the exit will await his departure sooner rather than later.  

The fallout from Zuma's decision to replace Nene sent SA's biggest banks straight to the ANC to reverse it https://t.co/kTixVqeniX

— Bloomberg Africa (@BBGAfrica) December 15, 2015

I can only imagine the ruling party, the African National Party, being closely engaged in debate over whether the decision to remove Zuma before his tenure ends in 2019 would prove beneficial for the party who have seen their majority voting base eroding with Zuma at the helm, probably suggesting that he remains a liability to them rather than an asset it so needs to give it the confidence it has lack the last 8 years since he was elected party president.

There isn't much work needed if you were to list the number of scandals Zuma has been embroiled in over the years which would give the ANC leadership much ammunition but at the risk of running into factional battles it has suffered from since 2007 elective conference in Polokwane when former South African president Thabo Mbeki faced off against Zuma with the former being recalled 9 months before his term was to end.

Then comes the question of who would the best candidate to run the country? The party's deputy president Cyril Ramaphosa has extensive experience in both the labour and organised business front which gives him good credibility but this is marred by the Marikana Massacre in which 34 miners died at the hands of police who sprayed an angry mob of strikers with bullets from automatic weapons.

Ramaphosa was the chairman of the company Lonmin and had written a letter to the police force only hours before the massacre occurred asking for "concomitant action" to be taken against these miners who were threatening violence. This has led to many, especially among the poor seeing him as a traitor or sellout of the poor with a business friendly hand.

I don't think the would be wrong as Ramaphosa has seen his wealth grow by astronomical figures since he focus in the business community which he sees as an opportunity to reduce unemployment figures that have dogged the country as trade unions have used their cosy relationship with the ANC and alliance partners, the South African Communist Party, to extend their dominance in the labour sector with more stringent laws in place against business who fail to comply with correct procedure.

You get a sense that if the ANC were to fire Zuma it wouldn't be based on the outburst of anger it has heard from all quarters over the last week but rather if it they have the necessary means to execute such a plan which places them in a dilemma in that they risk losing more political ground if they don't make a change and still lose if they do. How they navigate through these periods of rough sea will ultimately define the ANC in the history books.    

Chinese iron ore production sees a decline but not enough

As the year is coming to a close it will certainly go down as a bad one for commodities that have seen a drastic drop in prices that began late last year but accelerated its momentum to the downside as further evidence shows that authorities in China have yet to successfully see any basing of its economy, sending shiver down spines of the entire global investor community who had hope to see better results by now.

One industry that has led the rout from the front is iron ore with major players in the sector having their domineering production and supply being interrupted from the likes of the Chinese themselves who decided to decrease their reliance on seaborne imports of steel and opting to produce it from their own out of date steel mills even though the costs of such would be fractionally smaller than that of global market prices.

But as the premium of global market prices to Chinese prices turned quickly into a discount the need to close down these mills prompted BHP Billiton, Rio Tinto and Vale SA to hone in on the lower cost steel mills in their own portfolios of mines and produce a larger supply than necessary in an effort to price out their Chinese counterparts.

However the battle has become that of the Chinese government who tries in vanity to subsidise their producers with big mining houses using their ability to lower margins to extremes but at the expense of chewing into huge chunks of long term shareholder value much to the dissatisfaction of many resulting in capital flight from the sector.

I doubt whether this trend will persist further as China has set about on radically changing strategic economic priorities with consumer demand forming the central point from which authorities base their policies shifting away from what we've seen the last two decades or so where a ramp up in investment spending contributed the most to the uprise of the Chinese economy.  

This fact sways my belief that government subsidies would no longer be a priority and with China accounting for 50% of the world production we should begin to see a decline in the quantity of steel being produced. We aren't however seeing that at the moment with small incremental decreases in cuts taking place becoming a frustration to mining houses around the world. We need to start seeing a meaningful drop off in the quantities being produced and brought to market to feel certain that the normalisation process has begun.

China's steel output drops again with more cuts on the way https://t.co/jNWIycqiGa via @business

— Jasmine Ng (@jasminengzt) December 14, 2015

A ray of hope for the African continent that has seen sentiment towards investment opportunities fall out of favour in the last few months as focus turns on rising interest rates in the US and the level of increasing risk pushes participants to safety.

However Angola looks set to start operating its official stock market in January 2016 as it marches forward with political reforms that have seen major inroads made in the investability of the former colony of Portugal after years of civil war.

It would be safe to assume that the delays in starting operations have been largely due to the slump in commodities and with Angola being a big oil exporter, their trade balance has seen it fall on harder economic times. The stock exchange will initially trade in public and corporate debt which I think is crucial in building trust between Angolan government, business and international lenders.  

Angola Stock Market Expected to Start in January, Lawyer Say https://t.co/M2vRdWfBWI

— Bloomberg Africa (@BBGAfrica) December 14, 2015

The implication of Zuma's decision to fire Nene on South Africa

Yesterday I wrote up on the decision by South African President Jacob Zuma to axe the Finance Minister Nhlanhla Nene in a move that upset not only markets but the general public as a whole. Zuma's lack of understanding to the ramifications surrounding him and his government's policies on the economy has been a bugbear for a number of years now but the move all but confirms that the man is unable to fathom the slightest clue of what he's doing.

After the bloodbath ended at the close of trade yesterday on the Johannesburg Securities Exchange, the various participants were looking at what lies ahead for the economy and what sort of impact such ill thought decisions say about the government executing them.

The Rand

The first measure of the health of a nation's economy is its currency for which it trades in with foreigners. The Rand has been on a weaker footing since the late 1970's and early 1980's as pressure began to mount on the apartheid regime to change their ways by allowing blacks economic freedom from the oppressive laws preventing that.

This trend continued into the age of democracy as the new government had much to prove to the world that it could be trusted to implement the right policies and eradicate the negative effects of the past regime and under the leadership of Thabo Mbeki and Trevor Manuel at the helm, government experienced an unprecedented wave of confidence flooding into the economy which saw the faster growth rate the South African economy has ever seen.

Added to this the Rand finally bucked the trend of going higher when the world economy was sent into shock during the period of 2007/08 Financial Crisis further placing the nation on a good footing going forward. However political power battles between Mbeki and Zuma resulted in the former being booted out in a rather distasteful way.

Once the Rand began flirting with the all important R10 mark to the US Dollar many wondered if Zuma's policies were strong enough to stop it dead in its tracks and prevent it from undoing all the good work done under the reign of the Mbeki Administration. However it wasn't to be the case as the local currency eased its way like a knife through hot butter leaving many questioning if it may begin its ascent to the all time lows last registered in December 2001.

Marching its way from R11.20 to above R14.00 this year put to rest the speculation if the level would be broken or not but the most important part is the consolidatory nature the Rand found itself since 2000 until recently has now been nullified and as a renewed valuation begin to set in at much higher levels.

Interest Rates

The South African Reserve will now be under immense pressure to protect the Rand after previously raising rates four times in the last year, none of which has any bearing on the direction on the local currency which leads me to speculate that the level at which Governor Lesetja Kganyago places interest rates into the market may be much higher than the gradual 25 basis points we've witnessed so far.

This will have disastrous effects on the economy that is barely able to produce 2% economic growth on the backdrop of the mining industry facing a backlash from trade unions and government's inability to resolve the matter that would see the necessary measures put in place to save the least amount of jobs.

If Kganyago is to arrest the destructive path the Rand is currently tearing through at the moment he may be forced to take drastic action, something that isn't unfamiliar to South African monetary policy as was seen during the era of Chris Stols where lending rates peaked at 25% as banks were left mopping up the foreclosures at a dismal rate.

There has been indications from Kganyago that he would defend the Rand with any policy tool he has on hand and went as far as to say he would intervene in the currency by selling off foreign reserves if the need arose. What we've witnessed the past two days is tantamount to carnage and I don't think the SARB would have sat back however had they intervened it may set the precedent that they will do the same in the future leaving the situation more volatile than normal circumstances which doesn't paint a pretty picture.  

Trade Balance

With a trade deficit that came in worse than expected no less than a week ago, the situation that is presenting itself only serves to exacerbate it further with imports expected to surge on the back of a weaker currency and exported goods finding foreign buyers with more ease as the prices are cheaper. In effective it should balance itself in the long term by dissuading local buyers to import and spurring exporters to sell products in droves, however we are more concerned about the short to medium term.

As a commodities based economy, South Africa relies heavily on the demand for these goods to fund the imports needed by its own economy. However given the crisis we are experiencing in that sector there has been little refuge to be found and thus resulted in a larger trade deficit than expected. The problem becomes worse when the situation on the platinum belt (platinum being the top commodity exported) in chaos as government continues to pressure mines to continue producing and trade unions demanding a living wage.

This has resulted in a glut in the platinum market with the situation becoming worse as the weeks and months pass by.

Then you have a drought that has hit the agriculture sector of the economy that some are predicting could be the worse in years is affecting the maize production, a staple food for many in the country. Beef prices are dropping because farmers don't want to be keeping cattle judging by the price of feed and the probability that they won't be able to recover their costs but what happens next year when there's no beef to sell. This all weighs on the import of food necessities.

Add this all up and you have the one side producing less revenue than needed to fund the other side that cannot be prevented as people need to eat with the resultant outcome being an overinflated trade deficit that puts strain on an economy already in distress.

Government

Zuma has set a dangerous trend in motion by wielding the axe on probably the most important man in cabinet and placing himself in the firing line of his party after it was reported early on Friday that he had not consulted those in high positions about the move sending even more shockwaves reeling in the financial markets.

What he hasn't realised is his actions now imply that he is willing to place his own personal life before that of the country going as far to secure the finances of the nations in the cusps of his hands to satisfy his own pursuits. This unfortunately doesn't sit well with those who have billion of rands worth of wealth placed in the market.

The uncertainty its created has damaged the reputation of National Treasury that I wouldn't be surprised to see Zuma being recalled which would likely face stiff resistance by himself and loyalist. This would give the ruling party no choice but to impeach him which I believe would be the necessary action to instill confidence back into the financial system.

How Zuma continues to push South Africa closer to economic calamity

Nothing comes as a surprise in South Africa when it comes to the likes of President Jacob Zuma who last night made a sweeping announcement surrounding the standing between himself and finance minister Nhlanhla Nene who got the boot and will be replaced with a political puppet, a one David Van Rooyen or should we rather say David Van Ruin, who barely has the qualification to run a municipality let alone the fiscus of an entire country.

The news came as a shock to foreign investors who sold off the Rand in quick succession to the announcement which saw the commodity driven currency falling to all time lows of R15.25 to a US Dollar further putting strain on the South African Reserve Bank to raise interest rates at a much faster rate than would be necessary to prevent economic catastrophe.

View image | gettyimages.com

To add insult to injury Zuma further went on to say that Nene had done very well under difficult economic circumstances, not the kind of statement you would expect from someone who has just fired the person who he had just stated was being deployed to another strategic position, thus implying failure to meet his requirements, the kind of contradictory rhetoric South Africans have gotten use to over the past 6 years of Zuma's rule.

I had written a blog towards the end of last year in which I felt worrisome about the state of the South African economy and how two key figures of both fiscal and monetary policy both bowing out of their respective positions following a similar tumultuous period in which Mr Zuma and his merry men (and women) of cronies were caught red handed wasting precious tax payers money on building a R200 million kingdom on his homestead in Nkandla.

The government spin was laughable to the point where officials tried desperately to cover up the overinflated prices paid with some being insulted that government would even feed the media with such drivel that resembled that of a manure farm.

This fell in the face of then finance minister Pravin Gordhan who saw a very uncertain future that lay ahead for the country. By this time the credit rating agencies began their circling and started picking on the government's debt grade of investment as the risk began to pile up. The Marikana Massacre put the ball in motion and Mr Gordhan was heaving in strain to prevent any more concerns that would dash confident investor perceptions.

View image | gettyimages.com

Nkandla was the final straw for Mr Gordhan who saw his cries of discipline in spending fallen on deaf ears with blatant defiance together with hungry state owned enterprises knocking on the door of Treasury with their begging bowls looking for more cash injections from the state to fund their own failures for which no accountability was needed. It should also be note that these enterprises have been and still are used to place Zuma's cronies in employment to reward them for the loyalty they afforded him through his darkest political hour with no considerations to the qualifications needed to run organisations such as these.

In came in Nhlanhla Nene, a deputy to Gordhan who had been working on a policy that would see government rein in spending and lift revenues with various measures to mitigate the risk of falling prey to credit rating agencies predictions that South Africa, put into a basket with other countries defined as developing economies, could face tougher economic times as a result of externalities uncontrollable by itself.

The market was satisfied by the appointment on a number of reasons the most important one being that they saw Pravin Gordhan as the voice of reason and the government wasn't willing to jeopardize the good faith it had built up with international lenders since the dawn of democracy. It reaffirmed this view in the fact that Nhlanhla Nene was known to the market as having a persuasive nature about his dealing and perhaps he could be the right man to arrest the wasteful expenditure by government.

It further saw the continuity of such policies in the way in which Mr Nene presented his case to the market in this Budget Speech this year by laying down the plans he and his predecessor had been working on. The rating agencies saw this as a sign of acknowledgement of a problem but also a proactivate stance to tackling the matter which helped blow the scent off the trail but only for a little while government officials regrouped to figure out the next card to play.  

However the Zuma administration has never been far from controversy as was the case earlier in the year when it was said that Zuma had agreed a nuclear deal with the Russians worth trillions. Figures like this don't often fall short of jaw dropping so it was only a matter of time before the media got hold of the story and started raising doubts to how the government was going to fund this costly deal.

Then there was the matter of SAA needing funding to enter into a new lease agreement with Airbus to lease out new planes. The company who has in recent years become the poster child of why government shouldn't bail out state owned enterprises was headed up by a close affiliate of Zuma, Dudu Myeni. It is very difficult to say what the exact status of this relationship is but it is known that the two have a child together.

With the public hot on the heels of a scandal surrounding the nuclear deal, Nene simply refused to fund such project which left Zuma feeling rather embarrassed after initially expressing his confidence and value it would bring the country (or should we say his bank account).

So when Dudu Myeni came to Treasury for funding Mr Nene once again refused, this time implicitly knowing that he had made guarantees in his budget proposals, one of them being to cut away funding to state owned enterprise, so any action to this accord would simply be a case of backtracking on his part which would harm his reputation but more importantly that of the country. There was no way of him agreeing to this.

View image | gettyimages.com

Zuma tried to apply pressure on Nene as Myeni, a close affiliate of Zuma, may have made known to him her unhappiness about the decision even though her aptitude to run the ailing enterprise has been called into question a number of times over the past year.

With a stalemate met between the two parties Zuma was forced to choose which side of the political allegiance his support lies, that where the interest of the country as a whole or or his own personal pursuits that have supported him all the way to the top. I think it's safe to say it doesn't take a genius to figure what decision he was going to make judging previous occasions.  

In one foul swoop, Zuma has plunged the finance ministry into disrepair with confidence in the policy it makes being tarnished to such an extent that one begins to compare the current situation to that experienced during the 1980s under the apartheid regime where sanctions imposed on the then government of PW Botha forced policymakers to keep finding ways of bypassing the market to reverse the negative impacts they would have on the economy but to no avail.

View image | gettyimages.com

Fiscal constraint played a big role in undoing that horrendous regime and in saying so will do the same to Zuma and his band of cronies. The great tragedy is its at the cost of the entire nation and the future prospects of South Africans who will have to bear the mark of ill considered policies enforced to keep one's own alliances pockets lined.

Where to from here?

Part 2 tomorrow

Top Tweets Today: 09/12/2015

Following on from yesterday's stock price onslaught , Anglo American seems to be receiving some more of the same treatment today as investors flee to safety after the company decided to suspend dividends in an effort to curb cash flow leakages.

The sentiment has also found its way into stocks such as BHP Billiton and Rio Tinto who have a progressive dividend payout policy in place but may have to revisit that strategy as pressure from all corners is pushing management to rethink their approach in a commodity crisis that has so far left no company unscathed.

Anglo: Fund manager bonus killer.

— Herman Lloyd (@HerrieLloyd) December 9, 2015

As China's inclusion into the IMF's SDR basket starts to settle amongst various participants in global trade, the spotlight will be heavily shone on the PBOC (People's Bank of China) as to the measures used in controlling the price of the currency.

Today the PBOC announced today that it would lower the reference rate for the yuan which pushed the currency to 4 year lows against the dollar as it expects the Federal Reserve in the US to finally lift interest rates for the first time in 9 years. In saying this we cannot forget the impact the central bank's action had on the entire global financial system when it decided to lower the rate by more than it had done in a few decades which sent shockwaves reverberating in every direction.

Policymakers knew implicitly how much economic power they had built up over the past decade but I believe that the 24th August 2015 will go down in the history books of financial markets as the day Chinese authorities realised that they can no longer manipulate their markets that would go undetected or unnoticed and their relevance in the global financial system was growing with every passing year.  

It also marked a day for the world of financial market participants who now have to battle a new fixture within the system which increases more volatility.

#China allows the #yuan to drop to a 4-year low against the US dollar: important for #oil and #commodities imports pic.twitter.com/WKVTfQUdFH

— Javier Blas (@JavierBlas2) December 9, 2015

Anglo American backed into a corner with nowhere to go

The biggest news the world woke up to today is that of ailing mining giant Anglo American releasing a statement in which it plans to radicalise its existing restructuring program in order to create balance sheet stability as it battles the commodities crisis that's lead it and all other commodity producers into a frantic push to keep shareholders happy.

One of the measures that will be put in place is the suspension of dividends for the second quarter of this year and the remainder of 2016 with management discretion going forward. This is the first time in 6 years that the company has had to take such action and second in the entire history with each occurring in relative short span of one another, there does seem to be a whiff of crisis in the air.

Anglo American scraps dividend for the first time since 2009 as it battles #commoditiesrout https://t.co/30LdOS1yIz pic.twitter.com/IQHHBKOfn6

— BN Commodities (@BNCommodities) December 8, 2015

The share price sold off quickly on the news as it had done 6 years prior as investors looking for certainty in terms of annual income were sent rushing to the sidelines in search of better prospects.

I'm a firm believer of the saying that charts don't lie and the one shown below illustrates how difficult this stock has had it over the past decade going into the Financial Crisis and all the way back down to critical levels and then a resurgence of buyers that bought into the Chinese growth story and the potential boom it was going to produce within the resources sector.

But you'll note that once the Fed began the biggest monetary stimulus program ever, this mark the peak of most commodity producers as the trend in China started to fade and the world needed impetus to move forward. However with most expansionary investment directed towards the Chinese economy one could say that the industry was heavily leveraged and wouldn't respond well to even a small pullback in commodity prices.

It took a while before we saw any evidence of gluts appearing in the market but when they did the market immediately focused its attention on it and since then haven't let go.

We've seen distress from the likes of big names players such as Glencore whose own plans to expand were dashed and resulted in an about turn stance to be taken as it tries to rid itself worth of a third of its debt. If Glencore could so easily become a target to those feeling skittish about the sector then the likes of Anglo American stood no chance in the face of worrisome reports fuelling the markets concerns.

I've mentioned it a few times before and I think the point that I'm trying to hammer home is so well exhibited in the case of the commodities crisis, when you see smaller players taking the heat there's worry but not enough to warrant the selloff we seeing at the moment. It's only when the bigger players start feeling the pinch that much of the attention needed in the sector is concentrated and the necessary leadership appears to fix the mess.

We've seen recently the world's biggest mining group, BHP Billiton, grappling to contain the damage from a dam collapse in Brazil where the economic and environmental impacts aren't even close to being tallied up as the mining company tries to prevent further damage being done. It's events like these that make management to start focusing on prudence rather than aggression in saving their organisations anymore operational damage and begin the process of cutting back.

I think we seeing the beginning of the end of the resource rout in my opinion but the effects are yet to fully come to market and it may be we see further downside in the months to come however it wouldn't be absurd to follow these stocks closely for green shoots as indications of the storm passing, but for now I'd stay clear while the chaos draws those seeking glory in a pile of rot.  

Anglo American shares getting smoked - down 8.6% today and 72% YTD. The company is now worth less than $7bln pic.twitter.com/GXV0Dotphf

— Jesse Riseborough (@JP_Riseborough) December 8, 2015

Following on from the commodities rout, Oil has broken past lows last seen 6 years ago as OPEC failed to reach an accord to the production cuts needed to drive the oil price upwards leaving the door open to nations doing as they wish. Iran has expressed its intention to get production back on track but I wouldn't envision other members to execute the same strategy.

It becomes a matter of price of currency versus the price of commodity and it would do well if the struggling members of OPEC were to halt their production for a while given that there's a glut it wouldn't increase pressure on the price at all.

This I believe will be the action taken by those finding it difficult to find foreign income receipts from the world that drain its reserves of necessary money to fund trade. Starving off supply will increase demand in tiny increments depending on the amount of suppliers who engage in it but if one nation succeeds at proving its effectiveness they others may be pushed to join.

Oil trades near lowest level in 6+ years https://t.co/OmyG5DH4Jb pic.twitter.com/U0a1g5qdmm

— Bloomberg Business (@business) December 8, 2015

Is China's proposal to start a new "World Bank" a good thing?

The past week has seen strong indications that China, whilst dealing with a lagged economy presently, is still on the right path to economic ascendency as more developments start to materialise showing that US global economic dominance may already be declining.

We heard a week ago that the Chinese Renminbi had been included in the IMF's basket of currencies used in determining SDR (Special Drawing Rights) which has been on the cards for the past few years and grew much attention this year when IMF president Christine Lagarde hinted at the idea of the inclusion. Even if the currency has a small weighting relative to its larger and bigger competitor, the United States, entering the basket at a 10% weighting from nothing does dilute the balance of power held exclusively by the other four  other nations currency of which three lost weighting while the US stayed the same so as to not upset leaders.

It comes as no surprise that China has now started the process to form its own development bank known as the Asian Infrastructure Investment Bank to emulate the well known World Bank but on a much bigger scale. China's quick rise has meant the need to source strategic resources from global partners has become a top agenda for Chinese officials with much dealings happening amongst many of its peers in Asia but also one of the most underdevelopment yet resource abundant continents, Africa.

According to the article, my interpretation would lead me to believe that the US objections with such a development relates to a well documented gentleman's agreement as to the political control over organisations such as the IMF and World Bank, with Europe controlling the former and the US the latter, would mean that this trumps on US ground to influence external economic development. This cosy agreement seems to be fading as the years past and the relevance of both nations economic presents diminish to the mighty economic growth engine called China.

Over US objections, China creates own World Bank » https://t.co/0m77EasFGG pic.twitter.com/14aEmhomnf

— CNBC (@CNBC) December 7, 2015

America's constant "look over your shoulder" attitude to China's own growth path and risks it presents to its own economic power has led the Chinese to forge a separate path next to the world's biggest economy as resistance to their ascension is seen as stifling its position to become the major player in the world order.  In the days when the Egyptians and Roman Empires ruled the world, power was converted from wars, in today's context not so much wars as the history books have written but rather wars over who has the greatest source of monetary power to dictate the direction of humankind.

The US has used the World Bank as it's own tool to fund those nations that agreed with its policy and what it stands for while leaving those who don't out in the cold which is why so many nations remain impoverished and will continue to be until there's a new order that changes this which is why I think the idea of a Chinese development bank is a big plus for the world.

View image | gettyimages.com

If we look at the economic spinoffs happening in Africa right now as a result of China's reliance on its resources, I don't think the African economy as a whole has seen such growth in its lifetime that not only liberates millions but also pushes many countries into the global ranks in direct competition for economic hierarchy with old powers who had previously used colonial rule that displaced much of the wealth Africa has always possessed into the hands of those it didn't belong too.

However with good comes bad and in saying this immediately my thoughts turn to the human right atrocities happening in North Korea on an ongoing basis and threats to use nuclear weaponry on Western powers to show its might. We should be reminded that China has for long been a close ally of this dictatorial family rule and protector of what it does whether it's wrong or right.

This does present itself as the real risk of forming such a development bank in that the funds used for necessary infrastructure that allows for an efficient production and an easier flow of trade between nations may be used to prop up regimes that have a questionable past. It will be interesting to see how China deals with such a situation as they wouldn't want to damage the major inroads they've made amongst world powers that would throw such influence off balance and serves to divide those at the top.

According to the article though, nations such as Germany, South Korea, Australia and Britain have signed up to join the bank which could be seen as a sign that the other major nations would rather cooperate accepting fully that nothing stands in the way of China climbing to the top of the world economy but would preferably manage relations from with inside the organisation which does mitigate some of the risk of funding bad regimes.

We've seen Chinese relations with the world begin to take shape which involves sending a positive message about China's present and future participation in the global economy with a much relaxed attitude to doing business with those it previously refused. The only tiffs we've seen thus far is between them and the US which does set a trend in motion.

It's no doubt that the Chinese story will be with us for decades to come but it's great to know that with passing time we as students of economic and political trends have the privilege of seeing it occur firsthand and there is no question in saying that the many case studies taken will certainly form the backbone of the next century of the each subject respectively.

Super Mario shocks the market with Hawkish Tone

In an amazing turn of events, ECB governor Mario Draghi announced an extension of the existing quantitative easing program that takes it out to March 2017 and a drop in the deposit rate from -0.2% to -0.3%. This seemingly didn't meet up to the expectations of most who had expected deeper cuts to the deposit rate and a longer timeframe to the stimulus and subsequently drove the euro versus major currency pairs to the highest in months.

If one looks at the longer term charts of the EURUSD they would see that there was quite a lot riding on the outcome and promises made by Draghi were priced in over and above what they should have but nonetheless, it doesn't change the fact that the US remains set to lift interest rates for the first time in almost 10 years as time is drawing nearer to the FOMC meeting.

Reading the article below, I tend to agree with the writer in that as much as the world has come to think as Europe as a problem child there are some positives coming out that may be missed out because of the overwhelming negative sentiment given to the trouble trading bloc.

I think it was prudent of Draghi to hold his cards close to his chest and only extend his measures in smaller increments as he doesn't want to exert his organization's economic influence to the extreme with the eventual product being a dysfunctional economy.

I wrote a blog a few weeks back (Negative interest rates won't help mend a broken economy) highlighting the market's obsession with free money and how EU politicians have become accustomed in their reliance of the monetary policy to make up for the loss of proper economic policy that would save the eurozone from it demise while the bickering over political ideologies burns on.

If we consider these points we could assume that Draghi himself is subtly throwing the suggestion that EU governments need to get their own house in order instead of their constant bombardment on the ECB for solutions to their problems and rightly so given that the EU monetary policy is at extremes never been tested which could spell further disaster if nothing is done.

Draghi knows very well of the the uphill battle that lies ahead after the showdown between Greece bailout lenders forced him to be more accommodative to Athens to reassure the market that everything will be done to ensure the longevity of the eurozone.However he knows the risk would clearly put a dent in EU leaders plans if and should more defiance as we saw in Greece were to descend in other EU nations such as Spain and Portugal.

If anything I believe the Euro will continue to lose ground against the Dollar simply based on the differences in monetary policies dictates it but the fact remains to be seen if this move pulled by Draghi will exert EU leaders into action and fix their economies.      

FT leader: Draghi only promised further easing, which he duly delivered. https://t.co/7A5mQCoT0e

— Megan Greene (@economistmeg) December 4, 2015

Dollar takes a pounding after Draghi strikes a hawkish tone

 Following on from the commentary above, as a result of Draghi's hawkish tone the Dollar came in for a hard landing as the move surprised many who had thought all but certainty in their views. The Dollar has been trending nicely over the past 3 months so a brief pause in trend wouldn't be out the ordinary which I think may continue into the end of the first quarter of 2016.

The debate after the rates have risen will be the pace at which the Fed sets in lifting rates and I am of the belief that I don't see a strong enough case to rise them in quick succession as the US economy is quite weak compared to other occasions.

Rough day at the office for Mr. Greenback - $DXY $UUP pic.twitter.com/1vOcPhU7yc

— Andy Nyquist (@andrewnyquist) December 4, 2015

Is Saudi finally ready to cut production?

A day before OPEC's summit meeting is to be held in Vienna, Austria rumours have been flying around that Saudi Arabia, the leader of the collusive oil body, whose goal is to control global oil supply, may be looking to propose production cuts in the wake of one of the biggest oil gluts the world has seen in a few years.

However it is further rumoured that there will be a number of conditions attached to these cuts that would also need the cooperation of other non-Opec member nations such as Russia. The plan is to hold off this year with the eventual cuts taking place next year but no date has been given.

If I think about the the economic degradation member nations of OPEC have been subjected to at the decision of the Saudis, it would be naive to think this price war has done no damage to those economies let alone the relationship between these members. There have been a number of calls from higher cost producers such as Nigeria and Venezuela to bring forward the summit but to no avail which does leave the Saudis in a precarious position to explain itself and its actions.

These reports not only fuel anger towards Saudi for dragging its feet but also call into question the stability of the alliance who I believe may go all out and retaliate and cut more production than necessary to see a significant surge in the price of oil. Consider Nigeria who is currently experiencing a reserve shortage that stops foreign companies from repatriating their profits back home as a result of loss of revenue from oil due to a lower price.

US shale gas producers have closed a staggering number of wells this year surprisingly, down dramatically from a year ago when new wells were spurting up at a blazing pace but I still think there is more story to the tale as we haven't seen the bigger players beginning to suffer the same consequences as the smaller ones.  

I think there remains an expectation that a debt crisis will appear in the shale gas sector with eager journalists ready to pounce at the exact moment one ailing company actually files for bankruptcy, we do see some trying to push momentum in public interest but so far nothing has stuck as much as we know.

I remain steadfast in my belief that there needs to be an event of extreme impact on the quantities of oil coming to the surface to feel confident that we've seen a bottom put in and I'll say it as I have in other blog posts, I'll be watching the story closely.

#Oil rebounds as the Opec rumour mill starts to speed up. Saudis to Propose conditional Cuts https://t.co/O4h13vYSMP pic.twitter.com/btprWH6eo8

— Holger Zschaepitz (@Schuldensuehner) December 3, 2015

I must admit I was a skeptic when an offer was made by AB Inbev to acquire SABMiller in a deal that would see a global beer giant formed accounting for 1 in every 3 beers sold and I must emphasis that I remain a skeptic as we start seeing news flow into the nitty gritty details begin to emerge surrounding the proposed sell off of a number of beer brands to lower the hurdle for regulatory authorities.

In one instance, a small brewer in the UK, Meantime Brewer Co which was purchased by SABMiller only just months ago will be one of the casualties to get the boot making you wonder if the deal was well thought through in the first place or was it merely an egotistical competition between the two largest brewers in the world.

An example such as above does exhibit differences in management strategies which would be very difficult to find synergies if AB Inbev were to take over the reins as most of the foundations being laid by SABMiller management being thrown into the wind. We cannot discount the chances of a deal going through but the more new information comes to light the more and more doomed the deal will eventually become.

    AB InBev to Explore Sale of SABMiller's European Premium Brands https://t.co/Nho10xXTtS

— Bloomberg Africa (@BBGAfrica) December 3, 2015

Why Montenegro joining NATO is bad for Russia?

It comes as no surprise that ever since the European Union came into existence that Russia has seen previous allies defecting and joining the economic trade bloc and as a result strategic ties amongst them and the Russian government severely damaged because of their new found partners, not taking away from the years of oppressive rule under the then communist USSR, you wouldn't think their was much love lost between them.

However these nations possess great quantities of valuable commodities as is the case in Ukraine where Crimea lies near large untapped wells of offshore gas reserves. Others are geographically situated near borders where political instability is pertinent for military or air force ease of access should and when unrest take place that threatens to sow the seed of discord.

NATO has added more fuel to the flames by openly inviting Montenegro, a former Soviet state to join their military alliance, of which some members include the US, Germany, Great Britain and France.

View image | gettyimages.com

At first it would be easy for one to simply brush off such intentions as NATO merely increasing the number of members it's organisation has thus propping up the military might it has but you'd quickly realize that a nation such as Montenegro doesn't fall into the category of a military powerhouse state. So it would be easier to assume that the move is along the lines of political strategy rather than adding arsenal to their war chest. 

NATO puts out its first invitation to a new member state since 2009 https://t.co/n9uLmySNoM

— The Independent (@Independent) December 2, 2015

Although the fall of communism has allowed many barriers to fall between great nations the trust given to one another, Russia and the rest of Europe, has always felt constrained at times and rightly so since the downfall of communist was just over two decades ago.

Europe's slowly building alliances amongst these former Soviet states takes away the possibilities that Russia could begin to create it's own economic power that would match that of the EU, putting in it's way obstacles that would almost assure that such measures would be very difficult to put in motion.

If we look at the feeble attempt by Turkey to stamp it's authority on Russia only to rush to big brother, the US, a more prominent members of NATO, for support when tensions grew high does leave open the chance that more nations like this may execute similar actions yet get away with it because Russia wouldn't want to challenge such a military alliance.

In effect Europe is leaving Putin out in the cold when it comes to finding partners that would aid his plans to extend Russian economic dominance by sizing down the shortlist of potential candidates willing and able to forge strong ties with. It is clear to see why Putin isn't very cosy with the West and won't allow such actions to hinder his stance.

China's Reminibi making waves in the currency market

China's Renminbi makes the IMF basket of currencies

After months of speculation over whether the IMF will finally add the world's second largest economy's currency to its existing basket of four currencies namely the Euro, Great Britain Pound, Japanese Yen and the US Dollar, the much anticipated announcement was made that China's Renminbi will be included, signalling a major boost for Chinese officials who have been put under pressure for most of this year due to reforms it has put in place in the financial sector of it's economy.

The move is indicative of global confidence in accepting the currency which is fast becoming a dominant fixture in most central banks reserves as China percentage of total global trade goes uncontested.

I mentioned in a previous blog that the move would definitely shift sentiment and that the other currencies are expected to make way as is already evident in the 5% drop in the weightings may put euro officials on alert as the Euro loosens its grip on international finance transactions.

What it does do is place scrutiny on the way China dabbles in it's currency as it sees fit with the recent bout of intervention in August 2015 causing ructions in global markets. Officials won't be as flexible as they are now so it will be interesting to see how they respond to this hopefully in a positive way.

China’s renminbi is now one of the world’s elite currencies. https://t.co/sYIWHsJva2 pic.twitter.com/5ZCeo7LIkZ

— NYT Business (@nytimesbusiness) December 1, 2015

UK set to begin airstrikes in Syria

As if Russia conducting military action in Syria to rid it of terrorism wasn't enough and Turkey's dilemma it's been placed in with an ever increasing refugee crisis, it seems as if the UK will succeed in passing a vote that will allow its air force to join scattered operations adding even more fire power on the ground.

If the UK wanted to increase its awareness to potential terrorism threats why can it not focus on the elements that exist inside its own borders before it starts muddling in an area that has no formal alliances besides that between Assad and Putin.

One only needs to think back a little over a week ago when Turkey shot down a Russian fighter jet to understand that the proper processes hadn't been followed and the necessary engagement amongst all hasn't been conducted with diligence in mind.

The same actions David Cameron instituted against former Libyan dictator Muammar Gaddafi when the Arab Spring arouse were all the signs of unseating dictatorial rule in the Middle East and Arab nations, we can deduce that by the effectiveness of the how quickly such actions were put into place.

However it's these same actions that lead ISIS to wage war against the West for what they say destabilises the Middle East.

 They say Give Peace a Chance, maybe they should give politicians a brain full of mindfulness instead...

UK military action in Syria is likely within days https://t.co/T8hXAw6EO2 pic.twitter.com/I04x3ZZBDj

— CNBC (@CNBC) December 1, 201